Sean O’Sullivan, founder of global venture company SOSV, has slowly but steadily built a sizeable operation over the years.
SOSV began as a family office and invested O’Sullivan’s capital after co-founding two companies, including MapInfo, a company that went public in 1994 before Pitney Bowes took over three more funds years later in 2007 , including a $ 277 million early stage fund that closed in 2019 and is now actively investing.
To complement these funds, the organization has now raised $ 100 million for a so-called “select fund” designed to help SOSV maintain its equity stake in some of its breakaway portfolio companies.
Due to other tools on the market, SOSV has not been completely paralyzed until now. Instead, SOSV has occasionally put together a special purpose vehicle to reinvest in certain of the startups it supports. But O’Sullivan says these were relatively small SPVs – think about $ 2 million or less in size. The new fund, he says, is set to write checks between $ 2 million and $ 5 million and even up to $ 10 million – or 10% of the fund under SOSV’s agreement with its investors.
The new fund will certainly give startups even more reasons to work with SOSV, which tend to issue their seed checks to first-time founders, which, according to O’Sullivan, are often – wrongly – overlooked by investors in favor of repeat founders.
He points to Apple, Microsoft, Facebook, Google and Alibaba and notes that without them the landscape would look very different. He says he experienced the phenomenon himself when he co-founded a company (NetCentric), according to MapInfo. “People were lining up to invest,” he says. “It was so easy to get the money without anything other than a business plan, and nowadays you don’t even need one of them.”
That doesn’t mean SOSV gets as much bite as it wants on every deal. For example, while SOSV has been successful in targeting new entrepreneurs, it was one of the earliest investors in FormLabs, a company now valued at $ 2 billion; It also backed JUMP, the bike-sharing startup that Uber acquired in 2018 – a $ 100 million fund is small by today’s standards. SOSV could well compete with gamblers who have billions of dollars to spend and who are writing bigger checks to younger companies at a rate never seen before in the world of venture capital.
It’s not an absurd worry, agrees O’Sullivan. He says he saw a couple of pointy elbows just this week. Part of a round of over $ 100 million came together, and one company that O’Sullivan didn’t want to mention didn’t want to make room for the startup’s Series B or A investors because it wanted to hit a certain equity threshold.
O’Sullivan says the previous investors agreed. (“They give us a multi-billion dollar valuation” and “are trying to buy secondaries from existing investors,” he explains, adding that SOSV would generally prefer to hold its shares through an IPO.)
Still, he suggests that there is no need to worry about SOSV. While the previous investors went with the flow, O’Sullivan says that “in most cases there is enough for the previous investors”.
He also calls it “good protocol for the late-stage investors”. [to make room] if you want us to continue to present you deals. “
In other words, small fund or not, SOSV also has some kind of leverage.